Tweet Thread of the of the Day
1: Today, I introduced a bill prohibiting the Fed from issuing a central bank digital currency directly to individuals. Here’s why it matters:
2: As other countries, like China, develop CBDCs that fundamentally omit the benefits and protections of cash, it is more important than ever to ensure the United States’ digital currency policy protects financial privacy, maintains the dollar’s dominance, and cultivates innovation.
3: CBDCs that fail to adhere to these three basic principles could enable an entity like the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable information on users, and track their transactions indefinitely.
4: Not only does this CBDC model raise “single point of failure” issues, leaving Americans’ financial information vulnerable to attack, but it could be used as a surveillance tool that Americans should never be forced to tolerate from their own government.
5: Requiring users to open an account at the Fed to access a United States CBDC would put the Fed on an insidious path akin to China’s digital authoritarianism.
6: Any CBDC implemented by the Fed must be open, permissionless, and private. This means that any digital dollar must be accessible to all, transact on a blockchain that is transparent to all, and maintain the privacy elements of cash.
7: In order to maintain the dollar’s status as the world’s reserve currency in a digital age, it is important that the United States lead with a posture that prioritizes innovation and does not aim to compete with the private sector.
8: Simply put, we must prioritize blockchain technology with American characteristics, rather than mimic China’s digital authoritarianism out of fear.
Points Well Taken
Every point of Representative Tom Emmer is well stated.
Some people are too dense to understand what he is getting at.
Central bank digital currencies are coming. They have benefits and drawbacks.
One drawback has already come up “free money”.
Biden’s Bank Regulatory Nominee Espouses Helicopter Money and Praises the Old USSR
Please recall my November 15 post Biden’s Bank Regulatory Nominee Espouses Helicopter Money and Praises the Old USSR
The People’s Ledger: How to Democratize Money and Finance the Economy
Click on the link and Download the report. It’s a doozie. Straight out of the Marxist handbook.
She proposes ending banks and giving everyone a direct account at the Fed. Here are some of her ideas.
In basic terms, the Fed will credit all eligible FedAccounts when it determines that it is necessary to expand the money supply in order to stimulate economic activity and ensure better utilization of the national economy’s productive capacity.
In the economic literature, this form of unconventional (by present standards) monetary policy is commonly known as “helicopter drop” or “QE for the people.”
To maximize the economic stimulus of the helicopter drops, however, it may make more sense to have a progressive scale for crediting accounts of individuals, so that less wealthy U.S. citizens and eligible residents receive proportionately higher amounts of money.
That is exactly what Emmer wants to stop.
His bill does not go far enough. The bill also needs to prevent negative interest rates and expiring money.
Of course there should not be a Fed at all, but let’s focus on what might be doable.
Thanks for Tuning In!
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Mish
The Fed has
been looking for ways to send money directly into people’s accounts for years
now because of the obvious utility of doing so if it becomes necessary to
stimulate the economy. Instead of relying on giving money to the banks and
hoping the money will “trickle down” by send money directly you eliminate the middleman
so it makes sense.
The Fed can
send me money directly to my account without having access to all my
transactions just like any company transfers money into my account for services
rendered. There is no need for an account at the Fed although my bank will take
its customary cut on the transfer. Financial privacy is maintained. If
everyone had one bank account there would be no problem but many people have
several so overpayment would be a problem consequently somehow the Fed has to
know some details and that is what the author is objecting to. The IRS has
those details and more too so they could do it easily. If the Fed wants to send
you money have them do it through the IRS with a bank transfer just like they
do already when you overpay. It is also useful to use the IRS if you want a
cut-off point above a certain income. Some people are unbanked so we will have
to find a workaround for them but they are a small minority. Logically it should be the IRS because they already have the details and the means.
For or agin what exactly? I am for that the stimulus money goes directly to
the individual instead of through intermediaries who steal most of it. I am not
for government knowing everything about me nor am I for companies knowing
everything about. I don’t like his proposal because it throws away the baby
with the bathwater. Frankly I see it as a veiled attempt to keep the old system
of economic stimulation through intermediaries when I feel that that is no
longer a good way. A few posts ago I put up this graph as asked what are the
differences between the 1990, 2001 and the 2008 recessions compared to those
before and after.
https://blogger.googleusercontent.com/img/a/AVvXsEiG8KO3fsFiU_HuJlPLPadyu_vkrBTKuGYMi_uI8PpiM2fcoVMhDPt-dDo8JqB4NxoKkijt1rQO80QgIAPiZQ5QGxlkNHSmVTVDcw6Dt9dKX2VNBIz4fw7asDFdY0IVyR5I3chcHoc4XheHDvlOP6re_zLNDKT7Jo1BXZJnmjRqh6YqBM-xgQ=s1106
In 1990, 2001 and 2008 we used monetary policy exclusively to get out of
the recessions while protecting the financial actors from the consequences of
their mistakes. That didn’t happen before 1990. Those recessions were long and
the climb back was painful for 90% of the people. The recessions before were
sharp but so was the rebound because financial institutions rapidly corrected
their mistakes. In 2008, thanks to Obama’s stupidity and his subservience to
the class that brought him to power, gave us the most damaging recession for
many decades. The stimulus was given to the financial institutions who
basically stole it and there was little that tricked down.
Monetary policy is a powerful tool but for it to work you need to allow
financial institutions to go bankrupt because of their bad decisions and if you
bail out those institutions instead of allowing them to fail those same
institutions find ways to siphon off the money to their own benefit. Greenspan
put an end to financial institutions risking bankruptcy and he also put an end
to letting the market decide interest rates. He was the Maestro who thought
that markets were to be managed and not free contrary to his former reputation.
He would give a very select group a heads up on what he would do before the
market knew and that is not a speculation. In our present society where corporate money
controls much of the political process you can no longer expect these
institutions to go bankrupt because of their political pull. However if this
continues history has shown many times that it will not end peacefully. The
only solution, and it is not the best one but the only one, to avoid this is to
send stimulus money directly to people so they use it.
If in the future if we allow financial institutions to go bankrupt then we
could change back to the’ more sane policies but until then we have to do
it this way. If you bail out Wall Street you have to bail out Main Street also.
That’s the deal now and if the powers that be don’t accept it then they run a
big existential risk.
Much went
to big business but much went to small businesses like yours and without it
they would have been in big trouble. In 2008 outside of the financial
institutions only the car companies were bailed out. Everyone else were on
their own and resulted in the weakest rebound ever and caused extreme damage to
workers, businesses and it lasted several years. This time money was given out
to individuals, small and medium businesses and big businesses and the result
is a strong rebound. Too bad it was so lopsidded in 2008. History would have
been different otherwise.
leaving Americans’ financial information vulnerable to attack, but it
could be used as a surveillance tool that Americans should never be
forced to tolerate from their own government.”